How Robber Barons hijacked the “Victorian Internet”

Ars revisits those wild and crazy days when Jay Gould ruled the telegraph and …

As the Ars team convenes for two days of meetings in Chicago, we're reaching back into the past to bring you some of our favorite articles from years gone by. This feature originally ran in December 2009.

It was 1879, and investor Charles A. Sumner sat at his desk, frustration pouring onto the page through his ink pen. Sumner, business partner to the radical economist and journalist Henry George, was finishing the concluding passages of a book about what had happened to the telegraph, or the Victorian Internet, as one historian calls it.

"This glorious invention was vouchsafed to mankind," he wrote, "that we might salute and converse with one another respectively stationed at remote and isolated points for a nominal sum."

But instead, he continued, "A wicked monopoly has seized hold of this beneficent capacity and design, and made it tributary, by exorbitant tariffs, to a most miserly and despicable greed."

It's a largely forgotten story, but one that still has relevance today. If you follow debates about broadband policy, you know that there are two perspectives perennially at war with each other. One seeks some regulation of the dominant industries and service providers of our time. The other seeks carte blanche for the private sector to do as it sees fit. Nowhere does the latter camp press this case harder than when it comes to network neutrality on the Internet, and appeals to the Founding Fathers aren't unknown.

"Our founding fathers understood that it is government that takes away people's freedoms, not individuals or companies," wrote entrepreneur Scott Cleland in an opinion piece for National Public Radio not long ago. Cleland opposes the Federal Communications Commission's proposals to codify into rules its principles prohibiting ISPs from discriminating against certain applications.

"At the core, the FCC's proposed pre-emptive 'net neutrality' regulations to preserve an 'open Internet' are not at all about promoting freedom but exactly the opposite. Freedom is not a zero sum game, where taking it away from some gives more to others. Taking away freedoms of some takes away freedom from all."

Reading this argument, one wonders if there ever was an age when the hands-off school of regulation got exactly what it seems to want—a network environment largely untarnished by public oversight.

In fact, there was such a time.

Hayessociated Press

Rutherford Hayes

Library of Congress

Three years before Sumner wrote his lament, the country was wracked by the most convulsive presidential election since the outbreak of the Civil War: Democrat Samuel Tilden of New York versus Republican Rutherford B. Hayes of Ohio. The Republican party had split between loyalists to the administration of Ulysses S. Grant and those appalled by its corruption. In truth, the resurgent Democrats were no better when it came to civic virtue, but they lured some Republicans away with Tilden, who famously battled bribery and graft as governor of New York.

When, on that November night in 1876, the popular results indicated a narrow majority for the reform candidate, many assumed the first Democratic victory in two decades. But not so at one of the Associated Press's most prestigious affiliates, the ardently pro-Republican New York Times. When prominent Democrats nervously contacted the Times asking for an update on the results, its managing editor John Reid realized that the election was still in doubt. He contacted top Republican party officials and had them spread the word via telegram—the electoral college votes in Florida, Louisiana, and South Carolina were still in play.

It was easy for these men to access the telegraph system, because its main operator, Western Union, was also militantly pro-Republican. During the long controversy in Congress over who actually won the districts in the disputed election of 1876, Western Union secretly siphoned to AP's general agent Henry Nash Smith the telegraph correspondence of key Democrats during the struggle. Smith, in turn, relayed this intelligence to the Hayes camp with instructions on how to proceed. On top of that, AP constantly published propaganda supporting the Republican side of the story. Meanwhile, Western Union insisted that it kept "all messages whatsoever . . . strictly private and confidential."

Tilden supporters weren't fooled. By the end of the debacle—Hayes having won the White House—they called AP "Hayessociated Press."

The great giveaway

A Union Pacific advertisement

It was no secret why Western Union sided with Republicans. By the 1870s, the Party of Lincoln (Abe himself being a former railroad lawyer) had given away massive quantities of land for the construction of railroads and telegraphs: almost 130 million acres (about seven percent of the continental United States) was granted to eighty enterprises. Although the telegraph had been pioneered by Samuel Morse in the 1840s, the innovation didn't really take off, economically speaking, until it partnered with the railroads, at which point it became the Victorian era's version of our information superhighway.

The Pacific Railroad Act of 1862 sped up the construction of a coast-to-coast railroad system, and it further subsidized telegraph growth as well. But Congress provided very little regulation or oversight for the largesse.

The result was the infamous Credit Mobilier scandal of the 1870s, a scheme that bears some resemblance to the Enron debacle of 2001. Rather than license the construction of the Union Pacific railroad to an independent contractor, its Board of Directors farmed the work out to Credit Mobilier, a company that was, essentially, themselves. In turn, Credit billed the UP vastly more than the actual cost of the project. To keep Congress quiet about the affair, the firm offered stock in itself to Representatives and Senators of any political persuasion at bargain basement prices.

In this context, it should come as no surprise that the nation's telegraph system quickly fell into the hands of one of the most notorious schemers of the Gilded Age.

Originally posted by orbenn:This article has a lot of good historical facts, and provides a good narrative, but misses on what actually allowed these events to take place. The error in its conclusion is due to the same misunderstanding of what "free market" proponents actually want, that Scott Cleland (unwittingly?) alluded to in his initial response.

A free market is not one in which monopolists can do anything they want. Rather a free market is one in which government and business are kept separate. Much like freedom of religion means separating church and state by minimizing their influence over each other. Government must create law and order, preventing for example Catholics from burning heretics at the stake and businesses from lying on their balance sheets. But separation also means government must not subsidize or churches or require them to buy expensive permits that some can't afford, and these same principles apply to business.

Looking at the story in this article it is clear that the key moments of tragedy were possible because government was unethically involved in the telegraph and railroad business. Government gave free land to the big railroads and telegraphs, and subsidized their growth. Then telegraphs and railroads were able to maintain their monopoly because corrupted government officials passed regulations that made starting a competing business economically unviable.

This unholy marriage not only prevented government from doing it's job of maintaining a fair competitive environment, but turned it into a weapon of the monopolists.

Of note here is how Jay Gould was able to start small competitive telegraphs, and eventually take over Western Union. When government is not involved with business and does not prevent it, small agile companies are able to compete against large ones and the tension naturally creates the best possible outcome for consumers. Of course Jay Gould was just as eager to unethically use government to his advantage as the large companies he aimed to take over and as he did, the benefits of competition evaporated. This is exactly why government must be structured to stay OUT of business. Free market proponents point to the founding fathers because their stricter interpretation of the constitution provides exactly that structure. In a lawful environment competition happens on it's own, and interference from a government that tries to 'help' end up making things worse. Government's sole role is to make unethical business practices such as exclusive access agreements (as in this story), price fixing and other cartel-type activities illegal and enforce those rules.

Today when free market proponents promote deregulation they are trying to remove the anti-competitive rules that big business has used the government to create. These consist things that sound good, but ultimately make it impossible for the start-up competitor to run his business. Things like expensive permits and certifications whose stated intent is to increase safety, but whose true purpose is to make the industry too costly for new competitors to enter. Regulation supporters on the other hand tend to argue as if deregulation means the removal of all rules.

This disconnect over the meaning of deregulation is what prevents us from agreeing and providing a more united public opinion to the government on what it should do, and just as importantly, what it should not do.

While you have made some good points, I think many markets are more complicated than that. For example, take barriers to entry. In many industries it takes an incredible amount of money just for a new competitor to get his foot in the door.

Also, look the effect of economy of scales. A larger competitor can very easily destroy a smaller company by temporarily lowering prices. Even if the larger company makes a smaller profit or even loses money during this time period, it will recoup the losses and far more when it is able to raise prices even more when its competitors go out of business and it gains a monopoly or near-monopoly status.

There are many instances where the market works, and I am all for deregulation and the government staying as far away as possible. Just look at many of the newer tech-related and Internet-related industries. However, there are also instances where the market is not as perfect as free market proponents would have you believe due to reasons like I mentioned above. In these cases, I see no recourse but for governments to step in for the good of the population, especially when it concerns utilities (electricity, water, etc).

The Internet has become incredibly important to our economy and population. Perhaps it is not as important as basic utilities like water or electricity, but it is growing more important and more integrated into our lives each day. At the same time, regional monopolies which provide Internet access are growing more powerful in the market and will soon be in the position, if they are not already, to filter/block/prioritize Internet data, which will hurt not only the public itself, but all of the businesses which rely heavily on the Internet and constitute a large portion of our economy.

We can argue about what should have been done regarding ISPs, exclusive contracts, and governments role in the past, but in the end, it's just "woulda, shoulda, coulda" talk. We have to face the real problem right now in the real world, rather than just saying how everything would have worked out alright if the government was never involved in the first place. That kind of talk simply equates to ignoring the problem presented to us right now.

Originally posted by Scott Cleland:Thanks for the opportunity to put your article into fuller context. Respectfully, Scott Cleland

Scott, I feel for you man, but Ars isn't exactly a level playing field. They've devolved into a mouthpiece for strong, centralized bureaucratic government regulation of, well, everything.

In fact, your advocacy of stronger use of antitrust to bring greater competition to the regional telecom monopolies created by government regulators in the first place will not satisfy these people, because what they really want is complete government ownership and control of telecom (see, e.g., Ars's strongly biased reporting in favor of municipal Internet and wireless). At their core, Ars and much of its readership are engineers who loathe markets of any kind, free or regulated, and attribute every evil about corporations to the "free market" and not the government regulation that fosters their behavior. At their core, they seem to believe that people and societies can be effectively centrally planned and managed like a system administrator manages a company's computer systems. You'll never get a fair hearing for your position here.

Originally posted by chronomitch:Evidently, you don't want the government to get involved, and the only solution you have proposed is to move. Move where? To somewhere else in the US? Well, the problems mentioned above are pretty much universal in the US. How about to a European country with government-subsidized broadband Internet? Well, you cannot do that due to your feelings on government intervention. What now? Moving, IMO, is an incredibly weak option, especially when we have the means to make changes ourselves by *GASP* making new laws via the government.

Using new Goverment regulation to fight old Government regulation seems strange to me.

The US is different than most countries due to the geographical spread of the population; distances are greater here, and towns are more spread out as well.

Internet access is already universally available due to dial-up and satellite providers; if fiber Internet service becomes truly costly then other providers will be able to afford to run their own fiber. The "last mile" problem is mainly one of costs, after all.

Or, we could treat Internet access as a public utility and run fiber to every mountaintop hovel. The cost of that to the US government would be interesting.

I'm not sure that a tax increase to me for someone else to have (better) broadband access is a compelling argument.

I don't believe the drastic solution you are suggesting is actually needed. How about simply making exclusivity deals for broadband illegal? How about making broadband ISPs spend X% of revenue on infrastructure in order to facilitate build out? How about mandating line sharing?

There are many things which could facilitate competition and broadband build-out without the government getting directly involved as a provider/competitor.

Why should it? Books are widely distributed, relatively cheap, and available in many different formats. I see no problem here.

Who decides who gets published?

Is it not the same problem as net neutrality is proposed for? The publisher is a gatekeeper between the consumer and the content producer.

If on the other hand, the 'problem' isn't present in the book publishing industry, why does the market work there and is feared to not work for the Internet which requires a net neutrality bill?

I am not that familiar with the publishing industry, but I don't know of any major problems, at least concerning the industry blocking certain authors from getting published. If you do, then please enlighten me.

From what I can tell, the major difference between the publishing industry and broadband ISPs is that the major publishing companies are in direct competition with each other. While there are a number of companies offering broadband in various parts of the US, many do not directly compete with each other, which is reflected in the poor choices and high prices for US broadband consumers.

Furthermore, it is not in the best interest of publishing companies to refuse to publish authors unless they believe their books will not sell. Even when it comes to more taboo subjects and authors, there are at least a few publishers willing to publish the authors' works as long as they will sell. This is not so in the broadband business, especially with companies which also offer cable service. Online video services (YouTube) and even certain protocols (bit-torrent) offer some of the best competition against cable television. As the law now stands, there is nothing illegal about Comcast charging more for certain protocols or chunks of the Internet, slowing down certain protocols or sites to discourage their use, or even blocking content altogether.

A net neutrality bill would simply lay some ground rules about these practices and prevent ISPs from blocking/filtering/prioritizing content which, I think is in everyone Internet user's best interest.

I should note that if there were actually some real competition between ISPs, I don't think a net neutrality bill would be needed because users could easily switch to another, better ISP if their current ISP started blocking data or doing some strange things with packets. This would be the market solution, but it is apparent that this scenario has not played out.

Reading this argument, one wonders if there ever was an age when the hands-off school of regulation got exactly what it seems to want—a network environment largely untarnished by public oversight.

In fact, there was such a time.

Also from the op-ed:

quote:

It was no secret why Western Union sided with Republicans. By the 1870s, the Party of Lincoln (Abe himself being a former railroad lawyer) had given away massive quantities of land for the construction of railroads and telegraphs: almost 130 million acres (about seven percent of the continental United States) was granted to eighty enterprises. Although the telegraph had been pioneered by Samuel Morse in the 1840s, the innovation didn't really take off, economically speaking, until it partnered with the railroads, at which point it became the Victorian era's version of our information superhighway.

The Pacific Railroad Act of 1862 sped up the construction of a coast-to-coast railroad system, and it further subsidized telegraph growth as well.

For such a "laissez-faire" system, there sure was a lot of government involvement. Ars Technica's editorial has a lot of chutzpah to cite acts of Congress as examples of market failure.

Originally posted by chronomitch:While you have made some good points, I think many markets are more complicated than that. For example, take barriers to entry. In many industries it takes an incredible amount of money just for a new competitor to get his foot in the door.

What would it take to start up my own fiber-based home entertainment service (TV, phone, internet)?

1. A business plan showing I can make a profit and pay back investors. 2. Actually convincing said lenders to lend me the money to make it happen. 3. Go in front of my local government (possibly more than one - cities and counties) and ask to use public right-of-way to bury my cables.

This is where things get messy. I will be met by my local incumbent carriers (Cox, Centurylink, possibly wireless internet providers) who will lobby hard to keep me out (obviously).

Their gameplan is this: any new entrant will cause prices to go up. Why? Because total fixed infrastructure costs will go up. Overbuilding a city with fiber to individual houses would - very roughly, and this estimate is probably low - cost $2500 per house.

In a city with 750,000 residential structures (houses, apartments, condo units, townhomes, etc) it would be 1.875B. If I could capture 1/3 of the total market (75%), thats 187,000 homes. Over the course of the repayment to my lenders, I'd have to return $10,000 per home, plus interest. So after all of my costs (connection to the internet, maintenance, workers, advertising, etc), over 20 years thats $500/yr. If I can get all of those homes to pay for $100/mo for basic cable (~60 channels in SD/HD), 10/2 internet to start with, and phone service with a reliable battery backup system for my infrastructure, I need my costs to be below $700/yr.

Based on what I know of the cable TV industry, that doesn't seem likely.

There isn't that much profit in the system to make it financially feasible for competitors to come in to the system.

The railroad and telegraph businesses were subsidized by government in a far from optimal manner and stand out as particularly poor examples. The TVA and the federal interstate system are better examples. Or consider the Internet, perhaps the finest pearl to emerge from the oyster of defense spending.

The government has cleared the way in more than a few instances for monopolies or oligopolies to bloom and the justification was usually the greater benefit of getting markets created or expanded. In these cases private investment alone may defer from assuming the risk or footing the enormous upfront investment costs by itself. Later on the criticism of consumer harm and unfair competition may be perfectly valid. It is the responsibility of government to evolve its regulations over time to redress the imbalance. Breaking up Ma Bell was overdue but finally regulations were changed and consumers benefited. Regulating telephone companies and cable companies with drastically different rules largely proved unfair as over a few short years technological convergence negated the original validity.

Net neutrality has become this nebulous term purposely beclouded by its detractors. In essence no discrimination would be allowed of legally sent packets based on protocol or content within a publicly connected network. Traffic shaping is permitted and differing bandwidth “packages” are allowed. No prioritization is allowed.

For some reason the way the Internet largely evolved and ran for years is now an innovation killing, profit sapping, nefarious government intervention scheme that will do us in faster than the end of the Mayan calendar in 2012. At least to hear the industry shills and ideological purists tell it.

As corrupt and inefficient as the government seems to be, it is really our only recourse for protecting our freedoms and maintaining a free market place due to the fact that the government is ultimately accountable to the people.

quote:

Is that how governments operate in the real world? Or are they more responsive to the interests of the powerful?

quote:

Your questions are very valid, but I guess it comes down to which would you choose from:A) Government beholden to voters that may be corrupt.B) Business beholden to profit.

I was going to say beholden to customers, but once they're a monopoly, customers don't really get a choice anymore. It's them or nothing.

The problem with free markets is that the endgame is generally a monopoly, and like you said, customers no longer have any say.

And on a national scale, government is similar. The candidate with the most money brainwashes the masses and gets elected regardless of merit.

To me, the solution to ISPs, and maybe electricity, gas, and similar infrastructure-based businesses is for local government itself to build and own the infrastructure. Sure, the initial outlay would be extremely expensive, but let's remember companies make tons of money off this. Long term the profit margin is tremendous. Rent the use of said fiber optics / power lines / whatever to any providers who wish to use it, as a proportion of how much they use. The entry barrier to start an ISP is permanently low, and the municipality has a dependable stream of income.

I say local government because it's much easier to keep on top of corruption on a local level. As another commenter said, the government is beholden to we the people. And it would be fantastic if everyone voted based on pragmatism, not party. The problem with this on the national level is that Congress is populated by ideologues who bicker and vote on party lines regardless of the issue or the sentiments of their constituents. Whereas on the municipal level, the people in power are much more accessible and beholden to their citizens.

Originally posted by chronomitch:Furthermore, it is not in the best interest of publishing companies to refuse to publish authors unless they believe their books will not sell. Even when it comes to more taboo subjects and authors, there are at least a few publishers willing to publish the authors' works as long as they will sell. This is not so in the broadband business, especially with companies which also offer cable service. Online video services (YouTube) and even certain protocols (bit-torrent) offer some of the best competition against cable television. As the law now stands, there is nothing illegal about Comcast charging more for certain protocols or chunks of the Internet, slowing down certain protocols or sites to discourage their use, or even blocking content altogether.

Fantastic article, I really like the way Ars provide interesting perspectives on current issues.

Regarding the net neutrality debate: To complement the theoretical and ideological discussions, don't forget to compare telco/ISP markets in the U.S. and various European countries to see the real world effects of successful governmental regulation in this particular area.

In all cases I've seen the regulated European markets provide consumers with more choice and better service at lower prices, with no signs of decreased incentive for telcos to innovate and invest, shown by e.g. rapid rollout of 3G networks, aggressive plans for future 4G networks and investments in improved DSL technologies and fiber networks.

Why should it? Books are widely distributed, relatively cheap, and available in many different formats. I see no problem here.

Who decides who gets published?

Is it not the same problem as net neutrality is proposed for? The publisher is a gatekeeper between the consumer and the content producer.

If on the other hand, the 'problem' isn't present in the book publishing industry, why does the market work there and is feared to not work for the Internet which requires a net neutrality bill?

A problem with your analogy is that the publisher would also be the 'last mile' distributor if we were to equalize it with the ISP concept. However, I don't remember ever seeing a "Random House" store. Instead, I have Borders and Barnes & Noble, just to name a couple of the larger ones. In addition, I can choose from several mom-and-pop bookstores in my local area as well as the plethora of choices on the internet.

ISP-wise, I have two choices - Comcast or Verizon - if I want any kind of faster-than-dialup connection. Oddly enough, the 'gatekeepers' are also the only ones I can choose from.

Your analogy would work better if the gatekeepers were divested from the last-mile providers - allowing me many choices on my end, while the gateways are maintained and monitored by a few, large ISPs.

* The corruption of the AP didn't change the outcome of the election; * The Western Union/Gould telegraph monopoly quickly became marginalized by the emergence of radio technology

Maybe all of you should stop thinking about Comcast's reset packets in the Bittorrent streams and think about the freedom of the internet versus RL? Who really has felt repressed? Even if you're worried about retribution, who here doesn't know about half a dozen anon proxies? Government regulation means government control. And with how many geeks always complain about copyright law and US control of the IANA, it blows my mind when we welcome more government control. The influence of corporate entities like the RIAA/MPAA are the biggest issue of the internet, but that's a MEATSPACE problem. If we didn't have abusive legislation like the DMCA and the Sonny Bono Copyright Act, the interference of megacorps would be severly curtailed.

MORE legislation will NOT correct the problem. Even if you're a supporter of the current administration, you should be concerned. Just like the USA Patriot Act, think about the abuses you'll suffer when "your guy" leaves office, and the next guy comes in only to abuse the power given to the federal government in new and appalling ways.

Remember: these are the same guys who stole bond funds from teachers and gave them to union bosses.

telcos are vastly larger and wealthier than the average municipality being stuck in these terrible contracts; the threat of state/federal enforcement is required to keep the telcos from strongarming towns into granting them a monopoly and then providing the worst service possible (and the threat does nothing if not actually enforced, as with the hundreds of billions of dollars given to telcos to build infrastructure that was instead used to buy each other up in an attempt to reassemble Ma Bell)

Not only that, whenever a municipality tries to enact something like network neutrality, the telcos argue that the municipality isn't allowed to do it because it's the domain of the feds. They can't have it both ways, and the individual municipalities don't have the resources necessary to win that fight.

quote:

The problem of the railroads is an excellent example of the government being in something that it has no right to be in. It was the government giving away land, creating artificial monopolies etc. that caused the problem. The corruption came because the government interfered in capitalism at all.

Are you one of those people who thinks we shouldn't have public roads? Because that's a pretty extreme position, but it's the logical consequence of what you're suggesting.

quote:

And yet this is how most people talk about democracy: as if what they wanted mattered. But democracies also behave according to what they are, and they suffer from a collective action problem. Laws that benefit a concentrated minority over a dispersed majority win over their opposites, because concentrated minorities have more incentive to get their facts straight and lobby for their own interests. Bad rules are private goods, while good rules are public goods.

That may be true. It seems to be a strong rationale for being especially wary of bad regulations proposed by concentrated minorities. I just don't see how it gives insight into whether a specific regulation is good or bad. It certainly doesn't disprove the possibility of good regulations. So we're back to the original problem: Is network neutrality a good regulation? And the "concentrated minority" infrastructure monopolies don't seem to like it, so by your logic that seems to be a factor in its favor.

There is also something else that your analysis doesn't consider: Not all concentrated minorities are unopposed. In this case it seems like AT&T et al on one side and Google et al on the other. Whatever validity there may be to the complaint that Google has too much control in general, if their position on this issue is in the interest of the public then we should lend them our support and hope that it's enough to defeat the opposition from the telcos.

quote:

In fact, your advocacy of stronger use of antitrust to bring greater competition to the regional telecom monopolies created by government regulators in the first place will not satisfy these people, because what they really want is complete government ownership and control of telecom

We already tried antitrust. Remember the AT&T breakup? That's how we got where we are. It certainly helped, but what do you want to do, break them up again? The problem is that this is a market where competition is inefficient. Running two or three or a thousand redundant fiber strands by that many competing companies to the same house does nothing but multiply costs by that factor. We need competition over the wire, not duplicative wires. But what that means is that whoever owns the one wire has to allow equal access to everyone for nondiscriminatory rates, i.e. either a municipal network or network neutrality. What alternative do you propose to get around that?

You're absolutely right. But what people hope is that the motivations of those organizations stay true: Companies want to profit, Government wants to safeguard ALL public resources and freedoms, and voters will reward/punish government appropriately. But all three angles are horribly broken right now.

What's "broken," of course, is a matter of perspective. Yes, corporations need to profit; it's from making those profits and sharing those profits with investors that corporations gain investment and provide the jobs that people need.

But the other side of the coin is that corporations cannot force anyone to buy their goods or services. People buy from corporations on a voluntary basis, and corporations (which can be very small as well as very large in terms of the number of employees they hire) vie with each other for business among the consumers that make up the marketplace. This is called "competition." If corporation A doesn't please its customers they'll move to corporation B, and if they can't find a corporation which will treat them as they'd like, often they will learn to live without the good or service a given corporation offers. And if corporations conspire to, say, set gasoline prices at the pump, or set insurance premium prices across the board--it is *the government* which allows them to do so (you might wish to investigate the anti-trust *waivers* the government gave the insurance companies long ago, for instance.)

But the government has no such voluntary element to it: the government basically says, these are your taxes, you will pay them or you will go to jail, suffer liens, ad infinitum. It matters not one whit whether you approve or disapprove of how the government spends the taxpayer money it collects: you will pay your taxes or else.

People want to whimsically talk about "we can vote them out" if we don't like what they do, but the truth is this doesn't happen nearly as much as it should. We could fix it with term limits in Congress, which I wholeheartedly support, but our erstwhile legislators (whom you naively believe "want to safeguard ALL public resources and freedoms") have defeated this sentiment every time it gains the slightest bit of traction. What could their motivation for doing so possibly be but a distinct disdain for "safeguarding our freedoms" and a distinct greed for promoting their own careers, social power, and paychecks?

The problem that so often arises in "voting them out" is that these politicians are funded by special interests who consistently promise the politician that if he scratches their backs and brings home the pork then they'll scratch his back in the next election. This is a tried-and-true formula that works well for many politicians--especially the ones that ought to be voted out.

Term limits, of course, would render the practice of pork bearing nearly moot, at least after the duration of a single term, for Congressmen. This is why they work so hard to defeat the notion of term limits every time it crops up. They are not the slightest bit interested in you or me, or what we think. They are interested only in themselves.

Look, for instance, at how they have proposed to butcher health care in this country--they want to *impose* it on American citizens as a tax--and indeed, if you opt not to participate by their rules, then they have no qualms about assessing another tax on you, as a penalty for not doing as you're told, and if you don't pay that tax you'll be dealing with the IRS and facing prosecutions, liens, and jail.

Wonderful people, our Congressmen--the only thing they know how to do is tax and spend money that isn't theirs while trying to appear beneficent in the process. I mean, aside from rejecting term limits, Congress has made it plain that it will not accept the "health care plan" it is prepared to force on all the rest of us. Whether we like it or not, and the polls all seem to agree that we don't like it, they are prepared to force it on us anyway. The arrogance is astounding.

What, basically, does government do anymore, except draw a line in the sand and *threaten* citizens with what they will do if citizens show enough cheek to resist?

The last side of the coin that I'd like to mention is the fact that when regulating private industries, which create goods and services that no agency of our government is capable of creating, the government wishes to force these industries, and by extension force us, to accept all of the restrictions and rules it lays down. If the government decided tomorrow, for instance, that in the "interest of consumers" it was going to force all of the major ISPs to open up their backbones to startups for lease, and that it was going to allow all of the ISPs involved, both the extant ISPs and the new "pretend ISPs" that would form, to double their current prices to consumers--what, pray tell, would any of us be able to do about that? Nothing, really--except pay double the rate in the name "opening up the market."

This sort of regulation would have the effect of freezing innovation, development, and investment. Why? Because it would then be the government, as opposed to a consumer-demand based market--who would dictate what any of these companies could do, and even more importantly, what they cannot do.

The list here is enormous: Fannie Mae, for instance--and the housing crisis that precipitated directly from Congress using taxpayer funds to guarantee bad loans so that mortgage companies, who otherwise would not have made such loans, would make them. Why would Congress do such a thing? That's easy--to buy votes, of course. The real sin is that they buy them with money that does not belong to them and they force us to pay the price--as has been true in this recession. They love appearing massively beneficent only so long as the money they dole out does not come from their pocketbooks.

It's all very, very sad. There seems to be no end to the half-witted meddling of Congress, and most of them who are now unfortunately in office will stop at nothing to meddle and in the process try and buy votes with money that isn't theirs. Shame on Congress for passing legislation that precipitated this recession. Shame on us if we let them do it to us again in the name of "health care."

The government has been in telegraphy for thousands of years, well before Morse invented the electric telegraph. Morse himself made much of his living as a government contractor, even before he started dabbling in circuitry. If you wander around Washington DC, you'll see a number of his paintings, commissioned by the government to record important events. That's right, he was a painter. Until photography was developed most painters worked for the government. The government directly funded Morse's first long range experiment, the Baltimore to DC telegraph line. From day one, the telegraph was a child of the government.

The government extended the reach of the telegraph through the 19th century. It was a big money saver. Remember the Pony Express? The government ran it for 18 months, until the telegraph lines made it to San Francisco, and put all the ponies out of business. In the late 19th century, Scribner's magazine estimated that the construction of the transcontinental railroads wasted from one to three billion taxpayer dollars. That was just cash outlay. It didn't count the land grants. The telegraph got a chunk of that, along with additional money for the cavalry to protect that infrastructure.

The simple fact is that private capital does not make large investments without serious government support and backing. If you look at any of the important nation building and maintaining entities, you'll see the hand of the government. Citizens have a choice. We can let government chartered corporations run things, or we can choose how to run things ourselves. We'll have to bail them out when they screw up whether they are public or private. We might as well get what we want out of the deal. Despite persistent fantasies, the private sector has never been more than a government created and sponsored creation. Don't belive me? Look at a dollar bill. It's just a government document. Just try running the private sector without money.

I really dislike the notion that the government has to get involved in anything. Unfortunately, sometimes a terrorist attacks, so the government forces metal detectors on us; sometimes people drive recklessly, so the government forces speed limits and seatbelts on us; sometimes pilots make navigational errors, so the government forces the use of complex systems that track planes and communicate with those pilots so they don’t crash into other planes. Are any of these systems perfect? No. If anything were perfect, we may never have needed a form of government at all, ever, let alone regulations.

This article highlights an area where people may not even realize they’re being harmed until it is too late, and the stakes can clearly rise as high as presidential elections.

The tortured logic that ‘the gubment ain’t perfect so it ain’t no way gonna tell me what to do’ needs to die already.

I don't know about anybody else, but I think its kind of funny to see how there weren't any laws against this stuff when it happened, so it was completely legal. I especially like how "Boss Tweed" used his constituents to gain political power. Even though there was only one reference to him in this article, I still would like to bring him up as a very important person/event in accordance to how Gould got bank. I don't care what anybody else says (and yes I realize that it is illegal) I attribute machine boss' wealth to how smart they were about they're business. Besides grafts, which are not inventive enough for me to appreciate, I love how the machine boss' around that time got they're money. In conclusion, wonderful article man. Keep 'em coming.

"Our founding fathers understood that it is government that takes away people's freedoms, not individuals or companies," wrote entrepreneur Scott Cleland

Regardless of what the founding fathers may have thought, that assertion is idealistic horseshit (or depending on who's mouth it's coming from, duplicitous, propagandistic horseshit).

Recall a recent episode in which our friendly over-concentrated corporate neighbors nearly made a post-apocalyptic 3rd world wasteland of the entire country by infiltrating the gov't, deregulating their own industry, and shitting themselves with greed.

But the staggeringly powerful monopolies of earlier decades provide an even stronger case. Let these little Randians tell us we were better off before Sherman and Clayton, for example. Should we go back? If not, reason demands that we dispense with such a priori philosophical claims and take corporate regulation on a case by case basis, depending on its effects. Ultimately, if it's good for the consumer, we want it; if it's not, we don't. I understand perfectly why our politicians and conglomerate media don't see it that way, but I wonder very much sometimes about the free marketeers who don't get their paychecks from the very corporate giants in consideration.

Originally posted by Scott Cleland:Where I most disagree with your article is that broadband companies are monopolies when they clearly are not as the FCC/DOJ/FTC competition reviews have consistently found. The U.S. has more facilities-based broadband competition than any nation in the world.

Mr. Cleland, the FCC/DOJ/FTC may not recognize that monopolistic business practices exist in broadband but a duopoly (which is the case in most markets) is not much better, from the standpoint of freedom of expression. I wholeheartedly disagree with your position. As the VP of a medium-sized local broadband operator myself I support network neutrality because the interests of big media will certainly trump that of the general public and smaller ISPs like us to the detriment of free and open discourse online. Mr. Lasar's article spells out quite nicely why a "two-party system" failed to provide communications in the public interest. The Internet is currently our most valuable man-made resource and turning in over to one or two companies in each market to decide what that infoscape looks like is a severe mistake.

I just want to add to everyone saying that I loved this article, and the comments that go with it. I always wanted to know why Western Union was so widespread but so hated when needed in my hometown. Now I know.

Originally posted by Gilgamesh: At their core, they seem to believe that people and societies can be effectively centrally planned and managed like a system administrator manages a company's computer systems. You'll never get a fair hearing for your position here.

Funny, most corporations, including multi-nationals which rival governments in size and scope, also seem to strongly favour centralized control. It's amazing how quick libertarians are to forget that fact. When companies can be declared "too big too fail", you have to wonder what lies behind all this propaganda.

Corporations are de facto elitist autocracies where power is unevenly distributed more-or-less permanently in the favour of money instead of ability, and where people who know nothing about how the business actually runs can make critical decisions about strategy without having to answer to anybody. Corporations are run as strict hierarchies where those below have little recourse to the abuses of those higher up, and human effort and time are worth nothing compared to those who have "ownership".

If you want a fair hearing for your "position", maybe you should have an honest position instead of presenting a thin facade.

Originally posted by chronomitch:Evidently, you don't want the government to get involved, and the only solution you have proposed is to move. Move where? To somewhere else in the US? Well, the problems mentioned above are pretty much universal in the US. How about to a European country with government-subsidized broadband Internet? Well, you cannot do that due to your feelings on government intervention. What now? Moving, IMO, is an incredibly weak option, especially when we have the means to make changes ourselves by *GASP* making new laws via the government.

Using new Goverment regulation to fight old Government regulation seems strange to me.

The US is different than most countries due to the geographical spread of the population; distances are greater here, and towns are more spread out as well.

Internet access is already universally available due to dial-up and satellite providers; if fiber Internet service becomes truly costly then other providers will be able to afford to run their own fiber. The "last mile" problem is mainly one of costs, after all.

Or, we could treat Internet access as a public utility and run fiber to every mountaintop hovel. The cost of that to the US government would be interesting.

I'm not sure that a tax increase to me for someone else to have (better) broadband access is a compelling argument.

I don't believe the drastic solution you are suggesting is actually needed. How about simply making exclusivity deals for broadband illegal?

It's been prohibited by the FCC for about 15 years now. It doesn't seem to have mattered much. Certainly that fact hasn't registered on many people here. I repeat it several times in every discussion I run across, and Mltdwn still tells us that municipalities need to change their franchise contracts to solve this problem.

And for Mltdwn, a municipality can't do anything to entice new entrants to the CATV field, except...offer subsidies for infrastructure! That's clearly not the right way to go.

quote:

chronomitch:How about making broadband ISPs spend X% of revenue on infrastructure in order to facilitate build out? How about mandating line sharing?

The US had mandated line sharing until sometime around 2001 (I don't recall precisely when the regulations were revoked). Mandated line sharing went away because ILECs whined about how it was too expensive, and how they had no incentive to upgrade their equipment because their competition would benefit just as much from the upgrade as they would. Why help out the competition?

In short, these suggestions are politically unpalatable, and don't stand a chance in the US.

Originally posted by bastronaut:Funny, most corporations, including multi-nationals which rival governments in size and scope, also seem to strongly favour centralized control.

Don't be obtuse. There's a vast difference, both in theory and practice, between a corporation's endeavor to centrally manage business affairs and a government's endeavors to centrally plan a national economy -- not the least of which is that the former still relies upon voluntary association with adverse parties in arms-length transactions, whereas the latter relies on the dispensation of force to compel the planned behavior.

quote:

When companies can be declared "too big too fail", you have to wonder what lies behind all this propaganda.

Show me a company that is "too big to fail" and I will show you a company that is too big to exist. Public policy ought to be focused on meaningful deregulation (as opposed to the kleptocratic faux deregulation of recent memory) and the aggressive use of antitrust laws to break up the multitude of government-created, fostered, and protected monopolies and oligopolies, from telecom to oil to insurance.

quote:

Corporations are de facto elitist autocracies where power is unevenly distributed more-or-less permanently in the favour of money instead of ability, and where people who know nothing about how the business actually runs can make critical decisions about strategy without having to answer to anybody.

Change "de facto" to "de jure" and you just described every government of every democratic republic in existence, except unlike corporations, they have the coercive power of police and courts under their control. Choose your poison.

Originally posted by Gilgamesh:[ you just described every government of every democratic republic in existence, except unlike corporations, they have the coercive power of police and courts under their control.

Originally posted by Gilgamesh:[ you just described every government of every democratic republic in existence, except unlike corporations, they have the coercive power of police and courts under their control.

Except that large corporations in the United States often:

1) Have heavily armed security forces

Which they use to force their customers to buy their goods and services? Your comparison is beyond ridiculous.

Force employees? The employer isn't using physical harm or the threat thereof, nor is the employer using fraud or in any way misrepresenting the fact that binding arbitration is a term and condition of employment. If the applicant doesn't like that, he or she is free to walk away from the employment offer and look elsewhere. The employer's insistence on binding arbitration does not constitute "force" under any reasonable and commonly accepted definition of the term.

I think the article would better be named "How Politicians Hijacked the Victorian Internet". Politicians gave railroads and telegraph companies huge tracts of land and then expected favors in return, such as the ability to snoop on their opponents' communications. They abused this to the extent that they stole the presidency. What kind of case is that for why politicians should have more power over the modern internet? I can't specifically lay out *how* more power will corrupt modern politicians, but why should we think modern-day politicians would be any better than the ones in the late 19th century? If they have the power to impose internet protocols that support Google's business model over Comcast's business model, how much corruption is that going to cause?

"In 1876, laissez-faire "freedom for all" meant (in practice) the freedom for Henry Nash Smith to read your telegrams if he didn't like who you supported for President."

Ironically, these days the federal government is the major wiretapping offender.

"It meant freedom for Associated Press to block criticism of Western Union, and even to put potential critics and competitors out of business."

As for anti-competitive business practices, in the telegraph days the worst offender of them all was the federal government. I'm guessing that whoever they gave land to became a winner, and everyone else lost. In modern times they have monopoly power over everything they touch. They're the elephant in the room, being ignored by this writer and others.

Originally posted by Geminiman:The problem that is clear throughout all of this isn't a lack of regulation, but that the government was getting involved at all.

Yes, the media was doing all kinds of nasty things during the election, however those are crimes of fraud and contract violation. They are punishable under criminal code without any regulation being needed. And because it affected an election, it's even more so. There are laws to deal with this without regulation.

The problem of the railroads is an excellent example of the government being in something that it has no right to be in. It was the government giving away land, creating artificial monopolies etc. that caused the problem. The corruption came because the government interfered in capitalism at all.

The solution is to prohibit government from anything not directly related to defense of person and property rights. By doing so, and allow capitalism to rule, you don't have these problems and people get what they pay for, not what they can blackmail, pressure, or otherwise convince the government to steal money from one group of people and give to another. (otherwise known as slavery)

So yes, regulation is a really bad idea. But then so is the government being involved at all.

You're joking right? Total, utter, laissez-faire capitalism? People do not behave rationally. This should be self-evident to every living, breathing human being. History's pages are filled with Bernie Madoffs, Enrons, and AIGs. Human greed knows no limit.

Corporations have become what every (cliche) conservative Republican harps on about government: bloated, inefficient, bureaucratized institutions governed by men seeking unlimited wealth (in the case of government, power). The modern corporation should be abolished, and this credit based system should be abolished. There isn't a single admirable goal, destination, or purpose anyone can name that our current system endeavors to realize. We are humans and we should endeavor to support ourselves and our families and that is all. We do not live and breath for profit margins or some greedy bastard's private jet. Today, the modern corporate/credit system is hostile to humanity. In every sector, the losing party is the common person.

The last disaster should have been allowed to reach its logical conclusion. We all would have suffered, but this country needs a reset to zero. There should have been blood in the streets.

Matthew Lasar / Matt writes for Ars Technica about media/technology history, intellectual property, the FCC, or the Internet in general. He teaches United States history and politics at the University of California at Santa Cruz.